Planning Your Exit from Your Business

9. A Family Succession

Family successions can be fraught with problems and emotions. A third party - such as a non-executive director or business adviser - can be useful in providing impartial guidance and asking awkward questions.

9.1 Identify a potential successor or successors and plan their development.

• Talk openly with possible successors. Conduct discussions in the workplace rather than at home.
• There may be only one realistic candidate. But you still need to be sure this person has the necessary skills and commitment.You might let them experience different roles, or get them to work elsewhere.
• It will be more difficult if there is more than one possible successor.Giving more than one person equal standing in the business could be a bad idea. If you do, make sure they share the same agenda and establish clear areas of responsibility from the start.
• Your children will expect equal treatment. But this does not mean they should all take an active role in the business.You could split the company's share capital into two types: one with full voting rights for children active in the business, the other with restricted or no voting rights.

9.2 Keep other employees fully informed.

• Involve long-serving staff in key decisions and in grooming your successor.

9.3 Discuss your future expectations with your successor.

• Aim to resolve any differences regarding the aims of the business.This will make it easier to step back when you retire - which can be difficult if you are relying on the business for a pension.

9.4 Consider your tax position at the earliest possible stage.

• You may be able to claim business-property relief from inheritance tax on shares you give to your relatives. This should allow you to transfer shares held for at least two years free of inheritance tax, even if you do not live for more than seven years. But you could lose some of this relief if your company holds investments.
• You may be able to defer (hold over) CGT, meaning your successor will pay it if and when the gain is released in future.
• Putting some shares in a trust for your children, from which you are excluded as a beneficiary, may help you cut your tax bill.

9.5 Put an alternative plan in place in case family successors are not interested.